Alliance & Leicester cut to sell at Deutsche Bank

SimonKennedy

LONDON (MarketWatch) -- Alliance & Leicester
uk:al
was downgraded to sell from hold at Deutsche Bank, which said it expects the mortgage bank's return on equity to decline as it is impacted by further margin pressure and an increase in mortgage bad debts. Although Alliance & Leicester isn't as leveraged as Northern Rock
uk:nrk
its balance sheet leverage has increased from a multiple of 19 in 2000 to 38 in 2007. "As the cost of wholesale funding increases and its availability declines we believe the ability of Alliance & Leicester to continued re-leveraging will diminish, which leaves its return on equity susceptible to a reduced return on assets," Deutsche Bank said.

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